We recently supported a client in refinancing a complex bridging loan facility and raising additional capital to complete works on a large-scale HMO conversion. The refinance allowed the borrowers to clear their existing loan, unlock equity, and complete the project’s final phase, all while navigating planning changes, expat status, and tenancy structuring.
The Client:
A well-established property development company with a strong track record in large-scale residential conversions and co-living schemes.
The Situation:
The clients originally purchased a former care home in Hampshire for £1.4 million using a bridging loan. The property consisted of the main care home building and a detached house, both classified under C2 planning use.
Shortly after the purchase, the clients successfully secured planning permission to convert the care home into a 36-bedroom sui generis HMO. They also obtained planning consent to change the detached house from C2 to C3 residential use. To increase its market value, they invested approximately £60,000 to convert the house into a 4-bedroom family home, which was then listed for sale at £600,000.
With this uplift in value, the clients sought to extract equity based on the new valuation of the house, while restructuring their original loan facility. Aria arranged for the loan to be split into two parts: one facility secured against the house at 70% of its £600,000 value, and the other against the main site, also at 70% LTV. The additional funds were used to continue development works on the main building.
As the original bridging loan neared its expiry, the clients required an extension and additional capital to complete the conversion and manage cash flow.
Our Solution:
Aria Finance arranged a refinance of the full bridging facility and raised additional capital against the enhanced site, which had a revised value of £2.725 million. We secured a long-term interest-only facility tailored to the project’s requirements.
During the application process, one of the borrowers relocated outside the UK, meaning he would be classified as an expat by most lenders. This typically would have resulted in an increase in the arrangement fee. However, due to our strong relationship with the lender, we were able to negotiate an exception, allowing the borrower to proceed under the original terms
At the time of completion, the property was occupied by guardians under short-term licences, as building regulations sign-off had not yet been achieved. Normally, lenders require all units to be let on assured shorthold tenancies (ASTs) before completing a loan. However, given the clients’ experience and the strength of their wider property portfolio, the lender agreed to proceed, with the understanding that the guardian licences would be converted to ASTs once building regs were finalised.
Benefits & Results:
The refinance allowed the clients to repay their bridging facility in full and raise additional capital to complete the co-living conversion. The lender was flexible in accommodating the borrower’s residency status and the transitional nature of the tenancies, recognising the strength of the proposal and the clients’ experience.
The successful completion of this refinance ensured the development could move into its final stage, positioning the clients to maximise the long-term income potential of the asset.
